Help for a courageous wife

Counsel offered to woman with hubby in prison, debt-ridden homeowner

Dave Ramsey is America's trusted voice on money and business. He has authored five New York Times best-selling books: "Financial Peace," "More Than Enough," "The Total Money Makeover," "EntreLeadership" and "Smart Money Smart Kids." His newest best-seller, "Smart Money Smart Kids," was written with his daughter Rachel Cruze, and recently debuted at No. 1. "The Dave Ramsey Show" is heard by more than 8 million listeners each week on more than 500 radio stations. Follow Dave on Twitter at @DaveRamsey and on the Web at daveramsey.com.

My husband is in the middle of serving a five-year prison sentence. We have a 9-year-old son, and we’ve sold our home and everything else of value just to get by and pay off debts. I’ve managed to pay off almost everything, but we still have about $20,000 in debt from credit cards and a car note. Our rent is $375 a month, and the car payment is $400. He was making about $100,000 a year before he was incarcerated, and the only income we have now is my monthly disability check of $1,478. Should I file Chapter 13 bankruptcy?

Samantha

Dear Samantha,

I’m really sorry you and your family have been put through all this. You’ve endured a real mess the last few years, and I know you’ve fought like crazy to keep things afloat the entire time.

First, there’s no reason for you to file bankruptcy. Chapter 13 is a payment plan, and right now you can’t make payments, keep your lights on and feed your child. The credit-card companies can wait. I’m not going to beat you up over those last two debts, especially after all the stuff you’ve been through and done, but there’s no way a car payment fits into your life, kiddo. You need a little $1,000, paid-for car, not a car payment. You can’t raise a 9-year-old on $1,478 a month when more than half of that goes out the door for rent and a car payment.

I want to get you back on solid ground so you can start growing again. I don’t have a magic wand that will turn $1,400 into $14,000, but I do want to pierce through your pain and love you enough to help you realize that you need to look at the figures and do some math. You’re not stupid, Samantha. You’re an amazingly courageous person. But you do need to sell that stupid car!

Dave

Sell the house to get out of debt?

Dear Dave,

Do you ever recommend someone selling their house to get out of debt?

Andrea

Dear Andrea,

The only time you’ll ever hear me tell someone to sell their house to get out of debt is as an absolute last resort. If there’s just no other way to turn a corner, then it might be an option. Another would be if you don’t really like the house, and you’ve considered selling it anyway. The third situation would be if the house is just too darn expensive. If you’re sending half of your monthly income to the bank to make house payments, then you’ve got way too much house!

But most of the time the house is not the problem in these kinds of situations. There’s usually lots of other stuff, like credit card debt and $700 car payments. I’d sell a car in a heartbeat before I’d ever consider giving up my home. Think about it, Andrea. Being forced to sell your home in a case like that would be an emotionally devastating experience. I mean, it’s your home.

And the truth is that in some places it would be a pretty good idea to hang on to a house. A lot of markets are already recovering at a rapid pace, and the real estate market in America – with the exception of a few trouble spots – is a lot more alive, dynamic and fluid than many people in the news media would have you believe. There are some seriously good real estate situations out there right now!